Insight

Section 301 of the Trade Act

April 19, 2018

Section 301 of the Trade of Act of 1974 (19 USC §§2411-2420), represents one of the broadest grants of power from Congress to the US president in the trade area.

Although Congress has provided the president with a variety of mechanisms to combat potential unfair trade practices, section 301 is the most flexible and potentially most potent weapon in this arsenal, authorizing the United States Trade Representative (USTR) to investigate, and seek the removal of, any “act, policy, or practice of a foreign country” that violates, is inconsistent with, or otherwise denies benefits to, the United States under any trade agreements. It also authorizes investigations of any activity, even in the absence of a trade agreement, that places unjustifiable or discriminatory restrictions on US commerce.

Almost any unfair trade practice can be the subject of an investigation, including restricted foreign market access (for example, to foreign government procurement opportunities or to markets “protected” by foreign governments), insufficient protection of intellectual property rights, and inadequate protections for US foreign investment.

The Investigative Process

Investigations can be self-initiated by the USTR or can arise from a petition submitted to the USTR by a private party. The USTR has 45 days to review third-party petitions and decide whether to initiate an investigation. In matters involving a trade agreement, the USTR is required to follow the dispute resolution provisions in the agreement. Third parties are typically provided an opportunity to submit comments to the USTR while the investigation is pending.

Investigations involving trade agreements must be completed within the earlier of 30 days of the agreement’s dispute procedures being completed or 18 months from the date the investigation was initiated. Most other investigations must be completed within 12 months from the date the investigation was initiated. The USTR is also required to negotiate with the targeted country to seek an end to the practices or to obtain other types of fair compensation, prior to considering any unilateral penalties.

Potential Trade Remedies and Reporting

If the investigation is completed and no settlement is reached, the USTR is empowered to “take all appropriate and feasible action” to eliminate the unfair trade practice, subject only to the direction of the president. Remedies enumerated in the statute include

suspending, withdrawing, or preventing, the provision of benefits under any relevant trade agreement;

imposing duties or other restrictions on imports; or

entering into agreements to eliminate the improper trade practices or to secure other forms of compensation for the impacted US industry.

All actions must be taken within 30 days of determining an unfair trade practice has occurred. The USTR may, however, delay the imposition of penalties if more time is needed to resolve the matter amicably.

The USTR is also required, under section 182 of the act, to submit an annual Special 301 Report identifying countries that deny adequate protection or fair market access for US intellectual property rights. Countries that engage in the most restrictive or unfair practices must be designated as “Priority Foreign Countries” and be subjected to a similar investigation process as that outlined above. (The 2017 Special 301 Report can be found here.) In addition, the USTR holds open, public hearings throughout the year regarding countries’ status as potential 301 targets, and to hear public concerns about issues experienced in potential unfair trade practices under section 301.